There’s really not much new in American’s plan. It’s basically following a template developed by other carriers that went through bankruptcy a few years ago. In a letter, president Jeff Brundage said the carrier would outsource maintenance operations and some of its clerical fleet service jobs and close its maintenance base at Fort Worth’s Alliance Airport.

Also as expected, American also hopes to dump its defined-benefit pension plans on the government, and drop company-subsidized medical care for retirees. The carrier said it also plans to trim management positions by 15 percent.

The most difficult part of the process, though, remains renegotiating new, leaner labor contracts. The airline can ask a judge to impose a new contract and wage rules on its workforce, but federal law requires the two sides to make a good-faith effort at reaching an agreement first.

While wages will undoubtedly be a issue, work rules and scope — the terms that dictate what pilots fly what planes — are likely to be bigger issues. If American runs true to form, it will try to shift more flying to its lower-paid crews at its American Eagle subsidiary.

American may emerge from bankruptcy with lower costs but many of the changes — fewer people, fuller planes, smaller planes on longer routes, more code-sharing and so forth — are likely to result in poorer customer service.

The fee is supposed to pass through the carrier’s costs for following a government rule requiring airlines to allow customers to change flights within 24 hours of booking without facing a penalty. In what amounts to a corporate temper tantrum, Spirit has decided to stick it to all passengers.

It’s ironic that in the airline industry, it takes the government to mandate what in most service businesses would be considered a courtesy. It’s even more ironic — yet sadly predictable — that the way an airline responds to be forced to offer better customer service is to find a way to make its service even worse.

29 Responses

“American Airlines restructures on the backs of workers” is a very misleading title for this article. One of the company’s larger expenses is the pension plans offered to its union employees…negotiated (read: forced) by the union thugs who have no idea about how to run a business. At the time of the bankruptcy filing, AMR’s pension funds had about $8.3 billion (with a B) in assets to cover $18.5 billion (again, with a b) in obligations. You do the math. That was in November. Fast forward to late January and early February… The Pension Benefit Guaranty Corp. just slapped a lein against over $90billion in assets because the pension fund is still causing problems for the company. So at a time where the company is liquidating assets (selling aircraft) and trying to cut operation expenses to even attempt survival after bankruptcy, we have the lovely unions that want to stand their ground and ensure that their employees still get their fair share. In the real world of business, when a company goes bankrupt, most people lose their jobs. At the very least, if they’re lucky enough to keep the job, they take a cut to salary and/or benefits. Why would union workers think the concept of economics does not apply to them?

Mike G. ….union thugs? Are you living in the 1940’s? American capitalism clearly favors corporations and profits above everything else, including people. Your mischaracterazation of the situation is a typical response I’d expect from a republican. Airline unions have very little power because they are governed by the railway labor act (which makes it very hard to strike), thus, giving the Company a clear advantage over the unions. So please dont say “poor company, mean union”. American is the only major airline who hasn’t gone through bankruptcy yet, and the only airline to not yet strip it’s employees of its retirement. I like how you simply blame the workers. I take it you havent lost your retirement? And every employee does realize that they are going to take pay cuts (not sure why you think they don’t). So you believe that it’s ok for business to negotiate, but not people? Get real.

A pension is deferred income… Already earned. If the AMR pension is short by $10B then that means AMR owes $10B to the workers for work already performed. It’s a debt no different than from a debt to any other creditor. EXCEPT, the if AMR does not pay then Uncle Sam covers it. I as a tax payer don’t want to this paid from my pocket book. So yes the government is doing the right thing to ensure the pension remains whole. And if the AMR management are bad negotiators then that is their failure… the not the unions.

We need to change the bankruptcy laws to prevent companies from dumping their workers and pensions while keeping all of the executives, executive perks, and bloated executive salaries and compensation packages. These executives need to be forced to give up all of their undeserved wealth and all claims to pensions prior to any move against a defined-pension plan. We have to stop this practice of running a company into the ground, firing all the workers, and dumping all of the responsibility for pensions and medical care back on the taxpayer. This is immoral.

Americans are schizophrenic when it comes to politics on one hand we place great important around being caring, moral and ethical in our society. However, when we go to vote, especially Texas, they put people in like Rick Perry. I just don’t get it. Nothing is going to change since, by design, we have neutered unions and effective silenced worker dissent.

It’s not like these guys were overpaid in the first place. A friend who works for Delta is making less at the ticket counter today then I made 30 years ago when i worked for a major carrier…and with fewer benefits.
When people crab about government workers being overpaid compared to their civilian counterparts it’s not because they’ve been showered with raise after raise…it’s because the civilian CEO’s have sent wages back to the stone ages….except their own, of course.
Just a thought, when’s the Oil/Gas industry going to get on this band wagon so the price at the pump goes down?

You are absolutely right that wages for the airline workforce – non-union or union – are lower than for comparable jobs outside the airlines. This is an important point that adds to discussion. The vast majority of airline employees, particularly at American with its amazing history that traces all the way back to Lindbergh, stay with the company because they love the airline and being associated with the amazement of getting giant jets off the ground every day.

As expected, American also hopes to dump its defined-benefit pension plans on the government, and drop company-subsidized medical care for retirees.
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Hey Mitt, is this the result of what you and your Bain associates call “destructive capitalism? If, as a result of their medical care being dropped, retirees slip from middle class into poverty, will you no longer be concerned about them? What safety net will be available to them? Would that safety net be adequate for you if the retiree’s were your parents?

Who else’s back can this be put on. The cost of human resources is one of the few things than can be limited. It’s another case of unions getting what they deserve when they strangle the life out of another goose that laid the golden egg. Unions are thankfully dying out. I just hope they will all disappear before they do irrevocable harm to our economy.

Jennifer, you are simply incorrect on the amounts of American’s cutbacks. American and its unionized employees made enormous cutbacks in wages, benefits and costs from top to bottom following 9/11 and continued to cut costs with innovation all across the company – – from layoffs to fuel practices to winglets to simple office supply cuts – – all the way until it made the sad decision to file for bankruptcy. The company had worked hard to try to continue to meet its pension obligations while other airlines dumped their pensions in bankruptcies in the mid-2000s, retained its own maintenance operations to avoid outsourcing this essential function to facilities outside the United States, and generally gave an old-fashioned effort to do the right thing for employees it was able to retain.

Mike G….congratulations to you!
The newly unemployed at American and their already retired fellows are going to get it in the neck in their later years and I’m so glad this will make you happy!!
When United did it’s latest bankruptcy dance a few years back a friend lost 80% of his retirement that he and the company had contributed to over 35 years and I’m sure American will be no different. Just curious what industry you’re in and what your wages and benefits look like compared to aviation? Wouldn’t be that overpriced O/G where the good times roll regardless that people can’t afford the product at their reduced wages? And don’t forget this little gem from American’s past where management guarantee’d their bennies while asking for employee concessions.

it was not the unions that put the company in the position that it is in. It was the top CEO and there bad decisions. The union has been fighting to keep jobs not take them. Blaming labor for the problem of the airline is dumb. But you already no you are so I leave it at that. The company wont get all they are asking and hopefully people will look at what has been done over the years with over management. Anyway they are in Bankrupt protection which is different. They still have money inthe bank unlike the other carriers that where broke.

Boy, the titile is pure Democrat swill. The Pensions are unsustainable. Check GM and the States for details. Somethings got to give. The company does not exist to provide a pension. Sorry, that’s the way it is.

Just to clarify the opinion of those who do not understand airline/transportation unions-Most of these companies do force you to initially join the unions that represent the workforce that you are about to join. The history of these unions does go back to protecting employees from harsh or inhumane work rules. Unless you’ve ever been an employee for an airline, you have no idea about the lifestyle of this job. I know everyone romanticizes the life of a pilot or flight attendant, but the fact is it can be sleep depriving, unhealthy, stressful, and uncertain. While you hear all kinds of stories that airlines tell you about how much the unions take, I would have to say that is called “projection”. The ones who take what they want, with no conscience, are the top tier moneymakers. The workforces that are abused the most are the ones who aren’t union members. They have no say about their jobs, and therefore, these are the employees in the airline that get their jobs cut after 30 years, with no hopes of ever getting it back. At least the union members can get furloughed, with the hopes of coming back to the job they love. I originally come from the south, where unions are frowned upon. I understand both sides of the coin, now. After educating myself on the history of airline business, regulation vs. deregulation, you begin to understand how these businesses are failing under the deregulation. Do not let them fool you-They want the public to think that labor costs are destroying them. It’s called Propaganda. As a business that serves the public through safety and regulations, they are doing the public a disservice by outsourcing mechanics. Airline crew members care more about you, the passenger, than the companies, but we do have bills to pay. We need the public to understand that of course the companies feel threatened by the unions, and they will not allow the unions to have what they want. But, I think the companies can afford to do many things, and one of them should be to manage their companies with integrity and care. That is NOT what’s going on with AA.

This is just a business trying to do the best it can to work out problems in hard economic times. If those workers wanted some insulation from any job cutting they should have thought of that possibility to begin with and got themselves jobs in top management. Common folks it’s just bidness and free enterprise doing what it does best. Mitt would understand.

Another reason I fly Southwest. It is not the union’s fault – I want to see anyone out there hauling baggage everyday tell me it’s not work. Management receives bonuses no matter how poorly the airline performs, stock holders make money, while the unions and taxpayers subsidize it all.

AMR, like many before, is abusing the bankruptcy code to dump obligations it can on the also bankrupt (negative 26 Billion PGBC), a quasi-government entity. Delta’s bankruptcy of convenience is one example of how this is played in America today.

Due poor planning, high capital costs, and a skilled workforce, the aviation industry has a business failure rate ten times the normal.

Changing the bankruptcy code to prevent these shenanigans and high social costs placed on those who have invested heavily in their career to find the rug pulled out from them in old age, while rewarding those who arrange this outcome is required.

Two changes should be made. A renewed emphasis on liquidation verses bankruptcy, although painful in the short term, would protect creditors, see poorly managed and lead companies fail, and let healthy competitors absorb capitol and labor while not having to compete with shoddily run corporations propped up for years in bankruptcy. This avoids a viscous downward spiral in the entire sector.

Regarding retirements and pensions, the only socially correct thing to due is to require retirees to be made whole prior to creditors or bondholders. This creates a positive sentiment to fund actuarial sound retirements, negotiate accordingly, and remove the despicable motive to shift retiree costs from the corporation to the public safety net.

Blaming the unions is very simplistic and erroneous. There are several reasons AMR is BK and is not because of “Union Thugs.” First, horrible management. Let me be specific; since Crandall left Amr management has made colossally bad decisions. Buying TWA and taking on their debt and then only scale back St. Louis. Building a billion dollar terminal in Dallas when they already had three perfectly there with enough gate space. Not fuel hedging like Southwest did in ’05. Post Dal/Nwa bk Nwa was up for sale. Crandall rued the day that he did not buy Pan Am’s pacific route authority which Northwest also had. In ’08 when Dal was making a move for Nwa AA stood on the sidelines and watched. Nwa had 3.5 B cash on hand, pacific authority, and just as importantly the Sky Team alliance which is so much better than One World. (One World with British Airways operating out of the very expensive London Heathrow and BA has taken the majority of the High Valued Customers over the Atlantic over AA. JAL is half the size it used to be.) So, with the combined debt and the much stronger competition from Sky Team AA has a revenue problem. All of which had nothing to do with the “Union Thugs”.
Second, the Government taxes airlines at a rate of 43% which is twice as high as the sin taxes for alcohol and tobacco, which also puts revenue pressure on the airlines. AA’s pension, which is enjoyed by both management and union is underfunded because good portions of it are tied to the interest rates the Fed puts out. Since our own government has so much the debt Bernanke can’t raise interest rates lest putting even more pressure on the treasury to come up with more money to pay the bonds.
Finally, Southwest is most unionized company in the airline industry with the highest rates in all categories and yet they are still profitable. Why? Because they have a good management team. While it might be mentally pleasing to think simplistically that some union thugs are to blame be careful what you wish for as some of those “Thugs” you refer to are highly educated and skilled airline pilots that will be asked to work for bus driver wages. I personally, when I get on an airplane, hope that quality pilot and his skill doesn’t go away.

I used to fly AA but pulled the plug on them when they unilaterally decided I should not keepthe frequent flier miles I had earned (service wasn’t the greatest either). After several years a client bought me a ticket on AA and the promptly lost my bag, they refused any compensation saying there wasn’t enough time to transfer it in a connection. Did I say the first flight was delayed over an hour?
IMHO AA has earned their right to bancruptcy.